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In his 2005 letter to Berkshire Hathaway shareholders, Warren Buffett coined the term «helpers» to describe the brokers, advisors, consultants, and active fund managers who operate between investors and the businesses they own. While these intermediaries can provide useful services, Buffett argued that they do not create additional investment returns in aggregate. Ultimately, the stock market does not create wealth on its own; businesses do. Every dollar paid to intermediaries is a dollar less of that wealth available to investors.
Since investors, in aggregate, own all businesses, they can do no better than capture the returns those businesses generate before costs. The moment fees and expenses enter the equation, total investor returns fall below the market's overall return. The larger the share claimed by the financial industry's «helpers», the smaller the share retained by investors themselves.
Buffett did not argue that all professional managers lack skill. Rather, he observed that even if some managers outperform, their gains must come at the expense of other investors, and the industry as a whole still bears substantial costs. As a result, active management becomes a negative-sum game after fees.
His conclusion was that most investors would achieve better long-term results by minimizing costs and owning a broad, low-cost index fund. By reducing the share of returns consumed by intermediaries, investors can keep a larger portion of the wealth created by businesses and benefit more fully from the long-term growth of the economy.
This idea became one of Buffett's most enduring investment principles and to demonstrate his conviction that low-cost passive investing outperforms most professional active management, Warren Buffett launched a famous USD 1 million wager in 2007. The challenge was simple: over the following ten years, a low-cost S&P 500 index fund would outperform a portfolio of hedge funds selected by investment professionals, after all fees and expenses.
Guess how many active «money wizards» accepted the bet? Only one: Ted Seides of Protégé Partners. He selected a group of five funds-of-hedge-funds as competitors, which held over 200 underlying hedge funds, and Buffett chose a Vanguard S&P 500 index fund as his representative investment. The contest officially began on 1 January 2008, coinciding with the onset of the Global Financial Crisis, which added dramatic context to the challenge. And it ran till 31 December 2017.
The outcome was decisive. Over the ten-year period, the S&P 500 index fund generated a cumulative return of 125.8%, while the basket of hedge funds returned roughly 36.3%, falling well short of the index fund's achievement (1). Seides later argued the decade had been unusually kind to the S&P 500.
(1) Berkshire Hathaway 2017 Annual Letter to Shareholders
(2) arithmetic average
(3) Fund-of-Hedge-Funds D was liquidated in 2017
(4) geometrical average
It is interesting to note that the USD/CHF went from roughly 1.125 to 0.974 across that decade, so a Swiss investor's cumulative return would have been around 95% in CHF following Buffett's approach.
The winnings went to charity (roughly USD 2.2 million to Girls Inc. of Omaha, because the stake was moved into Berkshire stock), and this famous wager became one of the most powerful real-world demonstrations of Buffett's investment advice: for most investors, minimizing fees and owning diversified low-cost index funds should (there is of course no guarantee) produce better long-term results than paying high fees to active managers. Or in his own thought-provoking words (1993 letter to shareholders) …«when ‘dumb’ money acknowledges its limitations, it ceases to be dumb.»
At Alpian, we share Buffett’s view that low-cost passive investing is the long-term way to follow. Our CHF-based solutions reflect this conviction, combining broad diversification with a very low fee structure of 0.50% to 0.75% (before ETFs' total expense ratios which are inevitable). However, we believe that markets are not perfectly efficient at all times, and risk management, fund flows and valuation levels matter over the long run.
As a result, carefully selected and modest tactical tilts may slightly enhance performance and cover in whole or in part the management fees over multi-year periods. Much like a pilot who allows the autopilot to manage most of the flight but occasionally makes small course adjustments in response to changing conditions, tactical positioning can help keep a portfolio on a more optimal path without deviating materially from its long-term strategic allocation.
Importantly, at Alpian, the transaction costs associated with these small opportunistic adjustments are kept to a strict minimum, helping preserve the portfolio's overall cost efficiency when positioning changes are made. This is one of the key reasons why we believe this enhanced approach is beneficial for investors. A small tilt at near-zero trading cost differs from a 2-and-20 fund of funds.
Since inception on 30 September 2022, the implementation of our modest tactical views has enhanced performance by 204 basis points (as of 21 September 2026) relative to an otherwise identical non-tilted equally weighted portfolio, roughly covering the management fees. Since the beginning of the year, these tactical adjustments have contributed an additional 38 basis points of outperformance (as of 21 September 2026).
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Disclaimer : Investments involve risks, including the possible loss of invested capital. The value of investments can fluctuate and there is no guarantee of making profits or avoiding losses. Diversification does not ensure a profit or protect against a loss. Potential investors should consult a qualified financial advisor before making any investment decisions. Please read the full risk warnings and other relevant documents on our website before investing.
Individual investment results may vary due to factors such as investment timing and specific strategy choices. Past performance is not indicative of future results. The content of this publication is provided for informational purposes only and should not be interpreted as legal, tax, investment, financial, or other professional advice.
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